The victims of vanity
AS OF today, 18 per cent of the world"s population is using up 80 per cent of the planet"s capacity to sustain life. Bracketed between the 1.1 billion merry overconsumers at one end and 1.1 billion living in unbelievable squalor and misery at the other is an immense pack of 3.3 billion who exist in extremely modest circumstances. The sheer political implications of this edge-of-the-precipice situation is enough to make you shudder.
The situation we all have to contend with is this 18 per cent minority manoeuvering to retain control over the huge areas that feed its vanity. The primary question is: what is the instrument that is being used to perpetuate this situation, which calls for the mass of the dispossessed to continue to surrender to the minority"s demands?
You will realise that this lopsided equation is what neoclassical economics is all about. It is not just a mathematical framework or analytical guideline to facilitate an understanding of "reality"; it really is a full-fledged ideology and design for remaking the world. The world that we are living in today is being cunningly, and insidiously, organised to fall into a particular pattern of imposed development, a massive restructuring in the image of an enterprise system. That"s what we have to contend with.
The most powerful organisation in the world is business. And this organisation is gradually and persuasively laying claim to just about every philosophy of life: invariably, every day, the transcendental qualities of rigour, of discipline, of hard facts, of rational action, are being called "businesslike". The raucous lexicon of business has been incorporated into our day-to-day language: we speak of "the bottom line", we speak of "efficiency", as if they were the language of normal human discourse.
All through this eventful century, the policy has been to create a "free and competitive market". The dichotomy is between free enterprise and controlled enterprise, between a free market and a market-controlled system, between state enterprise and private enterprise. The world is divided between these two extremes, the first advocating autocratic command and control, the second promoting a laissez-faire free market.
China and the erstwhile Soviet Union were leading examples of the socialist system, in which people come first. When the socialist system cracked up, the free market mechanism grabbed the opportunity and filled the vacuum. When you study this more carefully, you"ll realise that the issue at stake is not the character of enterprise, whether it is shackled to the state or to the private sector: the issue is that the common denomination of all relationships has become the enterprise.
In this sense, what precisely are the implications of allowing enterprise to become the predominant factor in almost all decision-making? Enterprise has only one bottom line: profit and loss. In business school, the first question they ask is, "What is your business?" You have a whole system behind you, a whole rigorous technology, with rigorous accounting, and a core of managers who go to Harvard Business School and so on.
This is all very well, but what has fallen by the wayside is the human community. Enterprise has now become the basis for calculating national income accounts, which are, in turn, just a pretty packaging of enterprise accounts. All you have to do is take profit and loss statements of enterprises and convert them into a national production statement. Nothing could be more contemptuous of the human factor.
You"ll find that humanity gets dehumanised and classified according to the charter of accounts of an enterprise. You are either labour, employee, officer, staff holder, customer or banker. Nothing more. You are a flesh-and-blood machine earning wages and salary, generating profits. Your existence is really redundant. Why?
Let"s analyse what would happen if I were to establish an organisation. I would look at everything in terms of opportunities and pick only those opportunities that would yield the most attractive profits. Given this, what happens to the residual, the tasks that are left behind? Ideally, the market is supposed to pick them up. But that never really happens.
Those of you who are familiar with mining of, say copper, know that only the high percentage veins are explored. What is left behind is dross, something impossible to extract economically. This is what"s happened to the world. What is left behind is a gigantic mess of virtually unsolvable problems: health, education, environmental preservation, care for the poor and the handicapped. This is the basis of mass "immiseration", to use a Marxist term.
Dream that faded
Take low cost housing: it began as a dream that faded into a fog of impossibility because builders concentrated on middle to high level housing, pushing to the twilight zone the urgency of low cost housing. The problem of environment, the ecological system, the problems of poverty, of equality have been allowed to escalate into situations of nightmarish complexity.
What is the answer? We can arrive at one only by tracing to the beginning this strategy of development -- a kind of retro-planning that shows us where enterprise became the central governing perspective.
Ultimately, the community is all; a community of enterprises with communal accountability instead of private owners with eyes on the profit graphs. The enterprise paradigm has established an accounting system that measures revenues, costs and incomes for enterprise owners. A new community paradigm must do the same for communities. If there is to be a shift in viewpoint -- and there will have to be, if we are to survive with a modicum of sanity -- a system will have to be set up that looks at matters that usually escape individual enterprise accounts. This posits a moral and not a mechanical universe. Enter business
Everything that we look for in enterprise -- all that rigorous efficiency, all that discipline, the merciless standards of performance -- either you have it or you don"t. And if you don"t have it, you go out of business. That rigorous standard of managerial acumen, the very intricate knowledge of technological issues that help make decisions and choose optimum alternatives -- is there a way of doing that with communities? That is question that we"ll be exploring.
And we"ll focus on accounting because accounting reflects the philosophy of the world. In the ancient world, it was the high priests who were the guardians of culture; in our world, it is the auditor. Matters are somewhat clearer at the level of the nation state, the concept of citizenship. But over the years, the concept of citizenship at the local community level has remained a problem. You cannot simply move out of a village. You have to register as part of the village.
The resources in a business are fairly well-defined in a balance sheet. Those are the resources with which the corporation works, and, put together, they represent the resources with which management of the cities work. The organisational structure is very clearly defined. In the case of a village, there are rights but there is no clear-cut organisation. In business, management is again clearly defined; in the community, there is a bit of a confusion between government and management. So, one of the things we have to look at is the definition of management at the community level.
In labour organisations, you have a collective bargaining agent for the legal union, who negotiates on behalf of the workers. And that is the market force. The community, on the other hand, has no collective bargaining agent. It is the government that is supposed to speak for the people of the community, but the government has over the years taken on more of an enterprise character and less of a collective bargaining agent of the community.
The corporate manager is a very highly trained professional. Civil servants have a set of quasi-disciplines, public administration is a discipline. But public administration is not community management. In corporate accounting, you have various indicators of performance: the balance sheet, the indicators of cash flows, all of which are lacking at the community level.
If we are looking at communities, what kind of accounts are we looking for? We are looking for a set of national accounts that are made up of community accounts, so that the perspective of the community gets reflected in the national accounts, simply because you have prior consolidation at the community level. In an essay called The End of Laissez Faire four decades ago, we first see the need for some system which is between enterprise and the nation state. The trouble is that state enterprise is limited by the narrow perspective of enterprise itself. Going back to that essay, we see that enterprise would be the end of individualism.
But the main characteristic at that time was precisely the preponderance of the individualistic perspective. And if it was the end of individualism, then the unit that you are looking at between the individual and the nation state is really the intermediate community, the primary community. Then, all the trade-offs that you must perforce make between the individual interest and the common good is achieved basically at the community level and you must deal with it at this level before you bring it up to the level of the nation state. And because it has been dealt with at the community level, it is likely that the nation state accounts are going to reflect the essential elements of the common good.
Thus, if there are floods, it is clear that the community will suffer. In the case of national accounts, a construction company"s additional business as a result of the flood will become increments in the gross national product. In enterprise accounting, the floods will produce an income because the enterprises that do construction work generate more sales and more income as a result of the floods.
Let"s take pollution: the incremental costs of the pollution are very clearly costs to the community rather than incremental income to the health industry (which has become a very large growth industry in the USA, for instance). All over the world, the health industry has become fat, partly because of the problems that the industrial civilisation is bringing in. The self-defeating way we have handled it is this: we have put measuring devices precisely at the places where cancer growth is taking place. As the cancer multiplies in that body, the growth indicators show "progress" -- only because you have put all the measuring devices at the point where the cancer growth is taking place.
Now, how do you begin to construct these accounts? There are two separate questions here. One is the system of accounts itself. The other is the organisational structure of the community. The system of accounts, how you construct the accounts, what kind of accounts you use, what kind of recording takes place, what the accounting concepts are -- that"s the whole system development. The other question, however, is the organisational development within the community. How do you get the community organised? This system of accounts is not a set of records that"s maintained by researchers but it is a set of records that is maintained by the community because it uses them in its day-to-day management.
In the Philippines, for example, there was one particular village behind metropolitan Manila that over the years has been studied repeatedly by Japanese scholars. The last study, done by the International Rice Research Institute, set up a system of accounts so that in the year 1975-76 they had a select group of villagers who actually maintained daily records of how they use their person-days; then they kept track of commodity movements, movements of paddy, of the cash transactions. These were tabulated into a set of accounts that moved from individual accounts, individual balance sheets and individual statements, in real terms, commodity flows, actual labour usage as well as in financial terms. And these were then consolidated into a set of village accounts. This community had the most detailed set of accounts that has been constructed for any one community.
We visited that village in 1985 to see whether anything of that accounting system had remained after that project. Nothing had remained. We interviewed the people and they said that was really a piece of research. "The researchers came here and they gave us these records, they had a very nice group of young ladies who helped us with it and because they were very nice, we maintained the records."
"But did you use those records for your own decision making?" No, that was not the point of it. The point of it was the data for the researchers to tabulate and do what they wanted. It was never installed as an accounting system in the village. There is a difference between the two processes. Out of those accounts, we constructed a set of matrices that showed what you could do with this data as a planning tool for the village.
Playing the market
To what extent can communities be enabled to play the active role of a market player? That leads to another crucial point: once you have accepted the system of community accounting, what are you going to do with that knowledge? What kind of ideas do you have in mind in terms of rights over investment, in terms of property rights on the resources of land, in terms of protecting your own state as a community, and so forth?
In addition, you"re not doing away with private property rights. In many jurisdictions, it"s already accepted, in principle, that property rights do not give the individual property owner full discretion to do with his or her property what he or she wants. There are already precedents for delimiting property rights such as zoning regulations. So, you try to reach some accommodation between property rights and the common good. But this time the common good is much more clearly and explicitly defined in terms of values added accruing to the community. That"s what the new accounting system contributes to it.
The second thing is the concept of communal property. In Japan, for example, there"s a long established principle that communities communally own the municipal water, they communally own their part of the river, that part of the lake. And that"s why in Japan there"s limited access to fishing and an elaborate 2,000 year old system of arbitration for conflicts on fishing.
Let"s say you have all this information about your land. Every household then records its trees and you have a monthly ritual: the community then looks up the volume of fruits that are coming into the market. Then they know what crops are going to be harvested at what particular time. That is the database. The commercial agent then begins to use this information as market information.
We"re not leaving it now to the enterprises to have their own malignant `cartelisation", you have the communities getting together and negotiating with each other. This project identification work, project promotion work, is done systematically; and, since every community has a collective bargaining agent, inter-community negotiations become a relatively simple matter. Right now, it"s very difficult.
As you know, in modern economics, the marginal wage theory no longer applies. This is the most absurd part of neoclassical economics. Wage decisions are not made according to marginal analysis, it"s all collective bargaining. When you do this, the community becomes even more powerful. The trouble with trade unions is that their principle of organisation is dependent on enterprise.
In other words, there are all sorts of complexities. For example, the cooperative movement can be a formality. It"s interesting that the word cooperative is a Western term -- its a very enterprise-oriented term. The old village associations in Taiwan operated very much as community organisations. They were not cooperatives in the Scandinavian sense of the term. They were not enterprises either. They were community-based. Their principle of selection was really a village.
What I"m suggesting is that life is going to be more efficient when you measure efficiency in terms of human values. It"s going to be far more efficient than the enterprise system. It"s a very seductive myth that no matter how much you"ve fragmented the decision-making, if you leave the market free, then everything will come out right. And we know it hasn"t come out right.
The point is that if you leave the communities as they are now, they"re extremely vulnerable. They are going to continue to disintegrate. I suggest that the reason they"re so bothered about disintegration is precisely because they don"t have the same rigorous measure of performance as enterprises do. And, therefore, they"re not able to give exactly the kind of incentives and motivate people the way enterprises do. But the answer here is not to commit suicide for fear of death. I think that the answer is that we must empower communities precisely by making them work like enterprises. And they can operate like enterprises but not be subject to the same distorted bottom line that enterprises have.
Often enough, I look at community accounts and say, "My gosh, this is big business!" It"s just amazing that nobody looks at it as a business. You don"t have to relegate communities to small-time micro-enterprises. If you look at communities around watershed areas, it"s amazing what potential there is for combining both good business and good ecology in the community-management system.